Which economic concept explains why a large drugstore chain can produce at a lower average cost than Whoville Pharmacy, an individually owned drugstore?
A)Increasing marginal returns
B)Diminishing marginal returns
C)Economies of scale
D)Diseconomies of scale
E)Constant returns to scale

Question

Which economic concept explains why a large drugstore chain can produce at a lower average cost than Whoville Pharmacy, an individually owned drugstore?​
A)Increasing marginal returns
B)Diminishing marginal returns​
C)Economies of scale​
D)Diseconomies of scale​
E)Constant returns to scale​

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages a firm may realize due to an increase in production level. As the drugstore chain is larger than Whoville Pharmacy, it can take advantage of bulk purchases, automation, and specialized labor to reduce average costs. This results in a lower cost per unit of output, enabling the larger chain to offer lower prices to customers than smaller firms like Whoville Pharmacy.

Which Economic Concept Explains Why a Large Drugstore Chain Can